Linearity is hidden somewhere

E[Yi] = i = g-1(
p j=1 Xijj + i)

Var[Yi] =

V i wi

Members of the exponential family

0.2

Yi i b(i ) fi (Yi ; i ; ) = exp + c(Yi ; ) a()

Typical insurance applications

Application Claim frequency Number of claims g(x) link log-link log-link Distribution Poisson Poisson Gamma Binomial w (weight) Exposure 1 (offset) 0 Log(exposure) 0 0

Average claimsize
Probability (e.g. surrender)

log-link or inverse
logit-link

Number of claims
1

Modeling the average claimsize

Covariates

Car insurance claims by McCullagh and Nelder, 1989

Distribution of the dependent variable

Distribution with weights

Frequency tables

Crosstabs hints for interactions?

Crosstabs hints for interactions?

Policyholder age Vehicle age

Vehicle group 0,083 0,148

Policyholder age 0,063

The first GLM model

The first GLM model

Problems with some categories

Problems with some categories

Policyholder age and average claim amount
330.00 310.00 290.00 270.00 250.00 230.00 210.00 190.00 170.00 150.00 17-20 21-24 25-29 30-34 35-39 40-49 50-59 60+ CI (95%) Mean

Problems with some categories

Problems with some categories

Vehicle group category and average claim amount
310.00 290.00 270.00

250.00
230.00 210.00 190.00 170.00 150.00 A B C D CI (95%) Mean

Problems with some categories

Problems with some categories

Vehicle age and average claim amount
350.00

300.00

250.00 CI (95%) 200.00 Mean

150.00

100.00 0-3 4-7 8-9 10+

After joining some categories

Policyholder age
350.00 300.00 250.00 200.00 150.00 Mean CI (95%)

Vehicle group category

350.00 300.00 250.00 200.00 150.00 A B C D CI (95%) Mean

 they each seem to be significant.

The second GLM model

Influence measures

After filtering (the third model)

The standardized deviance residuals

The standardized deviance residuals

Observations vs. estimations

The final model

The final model

The final model

E[Yi] = i = g-1(

p j=1 Xijj

+ i)

E Yi = exp 5,576 0,098v_age2 + + 0,385v_groupcat3

The final model

Var[Yi] =

V i wi

1 2 wi i

wi

= 2 i
2

Var Yi = 0,579 exp 5,576 0,098v_age2 + + 0,385v_groupcat3

The goodness-of-fit change

Joining some categories

Removing observations

Typical insurance applications

Application Claim frequency Number of claims g(x) link log-link log-link Distribution Poisson Poisson Gamma Binomial w (weight) Exposure 1 (offset) 0 Log(exposure) 0 0

Average claimsize
Probability (e.g. surrender)

log-link or inverse
logit-link

Number of claims
1

Modeling the probability of surrender

Covariates

Unit-linked policies, real data

Frequency tables

Histograms

Histograms

Crosstabs Cramers V

Currency Policyholder Payment_frequency Acquisition Term_cat Payment_type_cat 0,131 0,101 0,1 0,187 0,215

Policyholder Payment_freq Acquisition

Term_cat

0,12 0,044 0,153 0,257 0,063 0,161 0,149 0,051 0,07 0,073

The first GLM model

The second GLM model

The third GLM model

The fourth GLM model

The final GLM model

E[Yi] = i = g-1(

p j=1 Xijj

+ i)

exp 1,504 0,863currency2 + + 0,452payment_freq_cat2 E Yi = 1 + exp 1,504 0,863currency2 + + 0,452payment_freq_cat2

ROC-curve

Classifications
Default cut-off: 0,5

Cut-off: 0,15 Cut-off: 0,1

Typical insurance applications

Application Claim frequency Number of claims g(x) link log-link log-link Distribution Poisson Poisson Gamma Binomial w (weight) Exposure 1 (offset) 0 Log(exposure) 0 0

Average claimsize
Probability (e.g. surrender)

log-link or inverse
logit-link

Number of claims
1